Wednesday, June 01, 2011

“Muni broadband” debate based on false premise of “competition”

Connected planet has posted an account of a debate between advocates and opponents of telecom infrastructure built by local governments.
I submit this is a debate based on a false premise. Telecommunications infrastructure tends to be a natural monopoly due to its high CAPex barriers to entry as well as substantial operating and maintenance costs.

By definition, there is no true competition in a monopoly. Nor is competition robust in a duopoly of just two owner/operators of telecom infrastructure that exists throughout much of the United States: a telco and a cable company. A healthy, competitive market by contrast has many buyers and sellers. That does not and cannot describe telecom infrastructure, so any debate over “competition” is a nonstarter.

If the position of the incumbent legacy telcos and cable companies is they should have exclusive ownership and control of telecom infrastructure, I strongly disagree. The incumbents are NOT entitled to a monopoly or duopoly by virtue of their incumbency. Particularly when so many homes and small businesses remain disconnected from the Internet in much of their service territories as the U.S. Federal Communications Commission recently reported, noting that an estimated 26 million Americans remain offline.

Local government and community-based providers such as telecom cooperatives must step into the gap and address this market failure with alternative, nonprofit business models that can function to provide Internet access where investor-owned ones cannot.

1 comment:

Eric Dynamic said...

Sorry not to have seconded you sooner.

The Incumbents are obsolete, and so are all the arguments concerning "the benefits of capitalism." We are clearly not benefiting. As the rest of the world is getting N x 1gbps FTTP, our incumbents are scared to death of it and keep pushing "wireless" despite accelerating concerns for the health effects of EM radiation.

I have advocated for local communities to wire themselves up to cut the intransigent incumbents out of the picture, see http://communityfiber.org. I also have a low-investment plan to overtake the incumbents if anyone would like to partner with me in the SF Bay Area; see http://uctelecommunications.com (Firefox only, MSIE doesn't work.)

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